I am co-owner of a small print shop in Chicago. We’ve been in business for about two years now and are really close to becoming full time. There’s one piece of equipment that would definitely push us over that edge and get us running full time but it isn’t in our budget. We’ve talked to several equipment leasing companies who said that our business credit and past bankruptcies would not be a problem. Then they turn around and decline for a lack of business credit and past bankruptcies. We talk to a financial expert who said that for the amount we need ($16,000) we shouldn’t have any troubles. So what now?

– Kenton Franklin, IL

ANSWER

Dear Kenton,

I understand that it can be frustrating to be promised credit and told that previous bankruptcies will not affect request for credit, only for them to change their position and reject your application. In my own experience, credit problems and past bankruptcies are definite drawbacks when seeking credit. Poor credit history (such as credit score below 650) will prevent you from getting money from financial institutions, including banks and leasing companies – even if you have a great business idea, or good cashflow. Big banks and lending companies are very likely not to grant you credit. Check out small banks that have demonstrated willingness to help small businesses in your locality; they are more likely to go beyond credit history when evaluating credit applications.

A recourse you may have now is to find some family members or friends who may be willing to invest in your business. However, as you know it will take an amount of effort to convince them the profitability of your printing business and assuring them that they can take their money back in due time.

You may also check out microloan lenders in your area. The $16,000 you are seeking is well within the loan amounts provided by microlenders. You can read our article “Micro Loans: A Way to Finance Your Business” at http://www.powerhomebiz.com/vol145/microloans.htm , and check out the contact information of the microlending institutions in Illinois listed in the microloan provider directory.

A longer-term solution is to build your business credit. An integral part of this process is to separate your personal identity from your business identity. The first step is get your business its own tax ID number, if you haven’t already done so, and then using it to start building credit. You may also wish to consider separating your personal address from your business address (e.g. services that can give you actual address such as Mail Boxes Etc., not a P. O. Box number). As part of creating a separate identity for yourself and your business, you also need to have a separate bank account, an official corporate name registered with local authorities and even a separate telephone listing.

Your business credit score is linked to the tax ID for your business, not your Social Security number. This important difference can help you get your business off the ground. Several companies, such as Equifax Small Business Financial Exchange and Dun and Bradstreet’s PAYDEX score, currently track business credit scores. If you are able to keep the loans opened by your business account on track by making your payments on time, you can establish a strong credit rating for your business.

PowerHomebiz.com has several articles on getting financing for your business. Perhaps you can drop by and read some of them. You may be able to get some pointers. You can visit them at our Getting Financing channel at http://www.powerhomebiz.com/financing/financing.htm

With a negative credit record, borrowing money or even buying on credit will be frustrating. On the other hand, as you say you have been in operation for two years now and business is doing fine. Perhaps, you can start saving some amounts every month and buy the machine later. Not getting the equipment now doesn’t mean that your business will stop. Of course, the convenience and time savings that you are aiming at will not be attained immediately, but it will come.

Nach Maravilla is the President and CEO of PowerHomeBiz.com LLC. He has over thirty years experience in sales and marketing of various products, which covered as he jokingly describes, “from toothpicks to airplanes” He also had extensive experience in International trading and he always excelled in special promotional ideas for retail outlets.

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